Enquiry:

Please advise us accounting treatment for post dated cheques issued for guarantee purposes.  Normally, these cheques are issued to customs authorities and are returned upon completion of certain formalities and payments into government treasury after certain period.

I think TR-9 used to refer treatment for the above issue which has been withdrawn subsequently.  Also please advise which IAS/IFRS includes such a treatment.

Opinion:

The Committee noted that withdrawn TR-9 referred to in your enquiry did not address the question raised by you.

The issuance of post dated cheques signifies an entity’s commitment to meet the future legal or contractual liability which is not recognized at the balance sheet date in accordance with the requirements of IAS 37. Such commitments, therefore, should be disclosed in the notes to the financial statements as required under the provisions of clause 10 (iii) of Part II of the fourth and fifth schedule to the Companies Ordinance, 1984

(April 10, 2009)